Stimulus Package
Property experts have urged the government to launch further measures to drive the market by attracting more foreign investors and boosting the low-income segment, following the tax allowances announced for the sector on January 20.
They expressed this view yesterday in a seminar titled “Property Outlook in 2009″, organised by the Real Estate Information Centre.
Government Housing Bank president Khan Prachuabmoh predicted that new mortgages would drop from Bt210 billion last year to Bt200 billion this year.
This is because of an expected drop in purchasing power for housing, despite the government having recently launched tax allowances and the prospect of interest rates being cut by between 75 and 100 basis points this year.
Manop Pongsatad, a lecturer from Chulalongkorn University, said the government’s measures – which will increase tax allowances to Bt100,000 for mortgage interest payments and Bt300,000 for principal payments this year – would only drive demand for the middle- and upper-income residential segments.
The government has to launch other tax measures to drive demand in the lower- income segment and among foreign investors
The government has to launch other tax measures to drive demand in the lower- income segment and among foreign investors, he said, as this would maintain the overall property market at nearly last year’s level.
Manop suggested four measures. The first would to be help home-buyers who are badly affected by the economic crisis and cannot make their mortgage repayments.
The government has to launch a policy for state and commercial banks to help such customers by revising their home-loan contracts into rental contracts for two or three years. This, he said, would enable banks to reduce the risk of rising non-performing loans, which have the potential to increase when purchasing power drops.
This measure would also help buyers keep their homes, as they would return to paying back their mortgage once the worst of the crisis is over.
The second measure, Manop said, would help the lower- and middle-market segments by revising the ceiling for which residential projects can get tax privileges from the Board of Investment, from the current Bt600,000 per unit with up to 150 units per project to Bt1 million per unit with a minimum of 50 units per project.
This will help buyers in these segments get quality homes at more affordable prices.
The third measure would focus on foreign investors by extending the leasing period from 30 years to 90 years for foreigners who want to lease low-rise residences in tourist destinations.
The final proposal is for a tax measure for the resale market. If the government introduced such an incentive, demand for new homes would rise because most home-owners, when moving, want to buy a larger residence than their old home, he said.
Property Perfect managing director Chainid Ngowsirimanee said the Bank of Thailand should revise the regulation stipulating that down payments of up to 30 per cent have to be made by those who buy luxury homes.
[relatedposts]He agreed that the government should extend the leasing period for foreign investors from 30 to 90 years. Such a move would boost demand for homes priced up to Bt5 million.
“We believe the property market this year will be better than in 1997, but the government has to drive the sector because there are now more related businesses and the property market is worth up to Bt500 billion,” said Preuksa Real Estate president and CEO Thongma Vijitpongpun.
He added that although the government’s tax-allowance measures should ensure that the market does not drop from last year’s level, these measures alone will not have the power to boost the market beyond that level this year.
The tax benefits will be much greater for the upper-income market than for the lower-income segment, he added.